How Would a Fully Privatized Economy Handle a Pandemic?

The following is a transcript of an interview of Austrian economist Hans Hermann-Hoppe.

Thomas Jacob: Professor Hoppe, you are known as a critic of the state and of political centralization. Doesn’t the coronavirus prove that central states and central government regulations are necessary?

Hans-Hermann Hoppe: On the contrary.

Various central states and international organizations have tried to use the pandemic to try out how far one can go with ordering other people around.

Of course, the various central states and international organizations, such as the EU or the World Health Organization (WHO), have tried to use the COVID-19 pandemic to their own advantage, i.e., to expand their power over their respective subjects, to try out how far one can go with ordering other people around in the face of an initially vague and then systematically dramatized danger of a global epidemic. And the extent to which this has succeeded, up to and including a general house arrest, is frightening.

And the extent to which this has succeeded, up to and including a general house arrest, is frightening.

But if the course of current events has demonstrated anything, it is not how necessary or efficient central authorities and decisions are, but conversely how critically important decentralized decisions and decision-makers are.

The danger emanating from an epidemic is never the same everywhere, for everyone, at the same time. The situation in France is different than that in Germany or Congo, and conditions in China are not the same as in Japan. And within diverse countries the threat level differs from region to region, from one city to another, between urban and rural areas, depending on the demographic and cultural composition of the population. Moreover, there is a whole range of greatly differing assessments and proposals concerning what and what not to do in the face of this threat level, all put forward by equally “certified scientific experts.” Therefore, any centralized, nationwide (in extreme cases, worldwide) measure to avert danger—a “one-size-fits-all” model—must from the outset seem absurd and inappropriate.

In view of this situation, it was only natural that, in addition to the representatives of the central governments, various provincial and local leaders everywhere quickly and increasingly became involved in the business of danger prevention. The epidemic offered them the perfect opportunity to distinguish themselves from the central state and its representatives and to expand their own sphere of power. They ignored, exacerbated, mitigated, delayed, or otherwise modified their central government’s measures for their respective regions, always with an eye on public, or rather published, opinion and often carried by the hope of eventually qualifying for the office of central dictator by becoming a popular regional dictator.

Notwithstanding some improvements in hazard control that such decentralized decision-making has brought about, and notwithstanding the fact that a variety of different and differently treated regions systematically supports learning from mistakes, the overall experience regarding states and state decision-makers in dealing with epidemics is shocking. As in all other areas, the state fails magnificently, especially in the area of public health and disease prevention. In fact, as current events make increasingly clear, the state kills or makes more people ill through its protective measures than it heals or protects from death.

Jacob: Are politicians simply stupid?

Hoppe: Certainly, politicians as a whole do not have the brightest of minds. And the “do-gooding” that unites them all as politicians, i.e., their claim to want and be able to help other people (or even the whole of humanity) to greater happiness and prosperity through their own actions, should be regarded as suspect from the outset. But the real reason for the failure of politics in general, and especially in dealing with infectious diseases, lies deeper and is of a structural nature.

Policymakers, whether central or regional, have “no skin in the game” when making decisions.

The deeper, structural reason is that policymakers, whether central or regional, have what is now casually called “no skin in the game” when making decisions. That is, they are largely freed from the risk of possible wrong decisions and possible losses and costs. They do not have to think long and hard about the consequences and side effects of their actions, but can instead make “spontaneous” decisions, as they are not personally liable for the consequences of their edicts. On the whole, they can burden other people with the costs of their actions. This is the deeper reason why and when stupidity and do-gooding—especially when combined—become a danger and then systematically promote irresponsibility, arbitrariness, and megalomania.

Take, as an example, the coronavirus: Why should one not, in the face of an infectious disease, resort to “bold” means, such as bans on going out and contact, house arrests, company closures, work and production bans, etc., if one does not suffer any direct loss of income as a result? The reason is, as is the case with all political decision-makers and so-called civil servants, one’s own income does not come from productive gainful employment, but is financed from taxes, i.e., by means of compulsory levies, and is therefore secured in the short and medium term. And why should one worry much about the indirect and long-term side effects and consequences of one’s own actions if one cannot be personally accused, held liable, and held responsible for damages? To justify one’s own “bold” actions, one can point to a small but creatively extrapolated number of people supposedly saved from serious illness or even death in comparison to the respective total population, while simply ignoring the consequences of a lockdown, i.e., the fact that a far larger number of people will fall into economic hardship as a result of these measures and will, as a result, indirectly and perhaps eventually fall ill or die.

In fact, at first it seemed as if the political decision-makers did not know at all (or did not want to know) that even “rescue operations,” however well intentioned, are not, and never are, free of charge. By virtue of being rescue operations, they were rather presented as “not having an alternative.” When the side effects became more obvious and could no longer be denied, they asserted that their decisions were about a tradeoff between “health” and “the economy” and that for them, being the do-gooders that they are, human life always has absolute priority over all economic considerations. There is an elementary insight that the “powers that be” showed themselves incapable of, or did not want to arrive at. And this is that such a dichotomy does not exist at all. On the contrary, a prospering economy is the basis for safeguarding humans and preserving their health in particular. It is therefore just the poorer regions, population segments, and people who are affected most severely by a lockdown (not least regarding their health). Only with difficulty could this elementary insight be reconciled with the stance taken by all political decision-makers of being the bold rescuer in the greatest emergency.

And when, finally, in view of the actual extent of societal impoverishment as a result of the state-imposed bans on contact, production and sales, company closures, expropriations, insolvencies, unemployment, short-time work, etc., even the naïve life-saving argument no longer held water and the politicians’ posturing as almighty savior sounded increasingly hollow or even hypocritical, they maintained that the losses incurred as a result of their measures would be compensated in the best way possible as a matter of course. In a sense, this would make them a savior twice over: the rescuer of a rescuer in distress. And this feat was accomplished by massively increasing the money supply. The loss offset or the compensation took place simply by creating from nothing some new state paper money, produced at practically zero expense. This procedure costs the political decision-makers nothing, and it hands them, always welcomed on their part, an increased amount of money, the allocation of which enables them immediately to put on airs as rescuing benefactors. In the meantime, the costs of this money supply increase, i.e., the resultant loss of purchasing power of a money unit and an increased future debt service are covered up and foisted on other people or socialized. The whole maneuver resembles the notorious example of the arsonist who subsequently acts as a firefighter in extinguishing the house he set alight and becomes a celebrated hero in the process. The only difference is that the state, by increasing the amount of money, also socializes the costs of extinguishing the house fire it set.

The state—and its representatives— have used the idea of the danger of being infected, which was systematically hyped up, to extend their own powers to an extent unknown so far, at least in peacetime.

But—and this is probably the most frightening thing about the whole corona episode—the state easily gets away with this brazenness. To be sure, there is resistance to the lockdown here and there, and the longer it has lasted, resistance to it has grown. But still the majority of policymakers are seen as heroic saviors rather than arsonists. And the state—and its representatives— have used the idea of the danger of being infected, which was systematically hyped up, to extend their own powers to an extent unknown so far, at least in peacetime. This includes the suspension of all property rights and liberties and an almost complete restriction of personal freedom of movement right down to inside private households—and all this in the name of infection control and public health.

In my opinion, the degree of subservience to politics expressed in this development is highly disturbing.
 

Jacob: How would the problem of a pandemic be solved without government regulations, in a private law society?

Hoppe: In a private law society, all land, every square inch, is privately owned. All apartments, houses, settlements, roads, waterways, seaports and airports, factories, offices, schools, hospitals, etc., have a private owner. This owner is either an individual or a group of individuals, a private association, each with its own house rules, organizational structure, and internal decision-making rules and procedures.

Every decision is the decision of a particular person or association with regard to their (and only their) private property. And every decision-maker is liable or covers the costs and consequential costs for his decisions or wrong decisions with his own property.

So this achieves, in contrast to all and any political centralism, a maximum of decentralized decision-making and, at the same time, a maximum of responsibility and responsible action. Every decision is the decision of a particular person or association with regard to their (and only their) private property. And every decision-maker is liable or covers the costs and consequential costs for his decisions or wrong decisions with his own property.

For the specific problem of dealing with a pandemic, this means that much like the immigration problem, the urgency of which is currently obscured by the coronavirus, the question in the face of a pandemic is simply, “Who do I let in and who do I bar?” or “Who do I visit and who do I stay away from?” More specifically: each private property owner or property owners’ association has to decide, based on their own risk assessment of an infectious disease with respect to their property, who they allow to enter their property, when, and under what conditions, and who they disallow. And, especially in the case of commercially used property, this decision can and will include one’s own preventive measures that are intended to facilitate visitor or customer access by making them appear to reduce or minimize risk. And conversely, visitors or customers may also take precautionary measures on their part to provide unimpeded access to various potential hosts. The result of these multiple individual decisions is a complex web of access and visiting rules.

All encounters or meetings of persons take place voluntarily and deliberately. They come about in each case because both the host and the visitor consider the benefit of their encounter to be greater than the risk of possible infectious contagion resulting from it. Therefore, neither host nor visitor has any reciprocal liability claims should an infection actually occur as a result of their encounter. This risk (including possible hospital costs, etc.) must be borne by each party alone. In this case, liability claims are only possible if, for example, the host deliberately deceived his visitors concerning his own preventive measures or if the visitor deliberately and intentionally violated the host’s conditions of entry.

But even without any deception, the decisions of hosts and visitors are never without a price. Every preventive or precautionary measure involves an additional cost that must have an apparent justification, whether by the expectation of additional profits or reduced losses, or whether by increased acceptance or reduced rejection by potential visitors. And, in particular, every private decision-maker also has to bear the costs of possible wrong decisions in this respect, i.e., if the expectations are not only not fulfilled but even turn into the opposite, if the supposed defense and precautionary measures are not only ineffective but turn out to be counterproductive and even increase the risk of infection overall, be it of hosts or guests, instead of reducing it.

These are considerable costs that are the responsibility of a private decision-maker and could still be his when faced with an epidemic. His economic existence and his closest social environment may be at stake. In view of this, he will consider his decision thoroughly, and all the more so the more property and friendly relations he has or maintains. He must be quickly prepared, often almost “by force,” to learn from his own mistakes and to correct his earlier decisions in order to avoid further economic or social costs.

Accordingly, as with all other problems or risks—real or perceived—the same is true in the case of infectious diseases and epidemics. The best—most cost effective and efficient—way to minimize the damage associated with an epidemic is to decentralize decision-making down to the level of private owners or owner associations. This is because, as mentioned above, the danger posed by an epidemic varies in different places and at different times, and is perceived as such. And, in general, there is no single, definitive, and unambiguous scientific answer for assessing the risk of an infectious disease. Rather, this question is an empirical one, and the answers to such questions are, in principle, always only hypothetical and tentative answers, and these may well differ and change significantly from one scientist to another and from the representatives of one scientific discipline (e.g., virologists) to those of another discipline (e.g., economists), as well as over time.

In view of this, it seems almost self-evident that decisions on appropriate defense measures should be made by local decision-makers familiar with the respective local conditions. And it should be equally self-evident that these local decision-makers must be private owners or owners’ associations. For only they are responsible for their decisions and their selection of experts on whose advice their decisions are based. And only they therefore have an immediate incentive to learn from their own mistakes or the mistakes of others and to reproduce or imitate success, whether their own or that of others, in order to approach a solution to the problem step by step in this way. And also worth mentioning is that in this environment of private decision-makers competing for a solution to the problem, there is always a considerable number of persons or groups of persons, far larger at any rate than the number of the gangs of politicians assembled in parliaments and governments, who are superior to these (the latter) in every conceivable relevant respect: in terms of wealth of experience, intelligence, entrepreneurial success or professional and scientific qualifications, performance, and judgment.

Instead of expecting that a quick and painless solution to the problem of infectious diseases will be accomplished by, of all people, politicians and their intellectual courtiers—that is, by persons who make decisions regarding the use of property by, and freedom of movement of, a vast number of persons completely unknown to themselves, without having any knowledge of local circumstances, by persons who do not assume or are not subject to any liability or accountability to others for their decisions, and persons who, moreover, are not particularly bright either—means that we must literally believe in miracles.

Jacob: Can you give an example of what would have been different in a private law society compared to the current political handling of the coronavirus? And how?

Hoppe: In short: corona would not have happened as a pandemic.

This does not mean that the virus does not exist or that it is not contagious or dangerous. It means rather that the danger of infection actually emanating from the coronavirus is so low that it would not have been perceived as such by most people (especially intelligent ones!) and therefore would not have triggered any significant changes in their behavior. And wherever a noticeable increase of infections or deaths was registered (e.g., in old people’s homes, hospitals, etc.), this increase would have been perceived as a consistently normal, seasonally or regionally fluctuating or varying phenomenon, like for example a serious outbreak of flu, to which one reacts with the usual precautionary measures. In other words, all health-related events and developments would have been within the normal range. There was and is no state of emergency, with hospitals or intensive care units overcrowded everywhere and seriously ill patients or dead people as far as one can see, in everyone’s immediate circle of acquaintances or even lying on the street, that would have given cause for a fundamental change in our lifestyle. On the whole, life would have continued as before. No reason to panic or to declare a global health emergency.

In fact, the total number of deaths in 2020, for example, in Germany, Austria, or Switzerland has by no means risen dramatically, as should have been expected in view of the unprecedented political emergency decrees this year. Rather, the figure is well within the range of past years. Indeed, controlling for the growing population size and its increasing over-aging, there have even been years with more deaths, but people have never previously resorted to comparably drastic and severe “rescue operations” as is currently the case. And even where there is excess mortality, it is by no means clear whether this is due to the coronavirus or if there are entirely different causes, such as the consequences of the lockdown. So, it is not corona that has changed the world, but politicians who have used corona as a pretext to change the world to their advantage.

The radical—economically ruinous—departure from the normal course of events that is currently taking place is not owed to a fundamental change in the world of facts or science. Neither facts nor science provides a basis for justifying a global “new normal” or a “great reset.” It is the result of deliberate machinations on the part of political elites to expand their own power base through lies and deceit, misinformation, deception, and endless propaganda on a hitherto unknown and unheard-of scale.

These crooked machinations included systematically ramping up the number of so-called corona deaths by accounting as a corona death any death in which the virus could be detected at the time of death, regardless of whether it had any causal connection to the death. Even a person with corona who died in a car accident was a corona death. Hospitals, even whole regions, received financial subsidies for reported corona deaths, while they were left empty-handed for normal deaths, which naturally led to corresponding redesignations. Moreover, deliberate action was taken to avoid ever correlating this scandalously inflated number of corona deaths with the by far larger total number of deaths. Because this, a proportional view, would have put the danger of dying from corona clearly into perspective and it would not have looked so severe at all. Therefore, the “powers that be” stuck rigidly and stubbornly to the absolute numbers, because these look more terrifying. And likewise, they deliberately avoided any reporting on the deadly collateral damage of the lockdown: the number of people who died because the hospitals were temporarily open only for corona patients, the number of suicides of the economically ruined, or the number of old people who died due to enforced loneliness.

The most reckless and consequential deception maneuver was to fundamentally change the definition of “danger,” to redefine it, and thereby to make it seem larger or magnified.

But the most reckless and consequential deception maneuver was to fundamentally change the definition of “danger,” to redefine it, and thereby to make it seem larger or magnified. Commonly and usually, illness and danger of illness are defined by the presence of certain symptoms. If a person does not exhibit any symptoms of disease, then from their perspective there is no danger. Instead, policymakers have enforced and based their decision-making on a definition of danger that measures danger not by the presence of symptoms, but on the outcome of a corona test. The danger is then measured by the absolute number of corona-positive persons, the more of whom are found, the more are tested, and this number is then endlessly, day after day, drummed into us and dramatically brought before our eyes.

The test itself is unreliable, with frequent false-positive or false-negative results. But more importantly, the outcome of the test has virtually no predictive value with respect to a disease recognizable by its symptoms or a specific disease progression. The overwhelming majority, an estimated 80 percent, of people who test positive for corona are asymptomatic and, according to current knowledge, the risk of infection from them is close to, if not even exactly, zero. Without the test, they would know nothing about the danger and would never know it (and they would be spared all the disease-promoting stress associated with the current mass testing). In about 15 percent of the cases a more serious disease develops, up to being bedridden. And in only about 5 percent of all cases, usually in connection with severe respiratory distress, intensive medical treatment is required. In total, if one believes the figures provided by the U.S. Centers for Disease Control and Prevention (CDC), which is government funded and whose entire raison d’être is based on the existence of infectious diseases and pathogens and can therefore hardly be assigned to the camp of “corona deniers” or skeptics, the following, less frightening picture emerges: the probability of surviving a corona infection varies with a person’s age but is consistently, for all age groups, extremely high. For the 0–19 age group, the probability is 99.997 percent. For the group 20–49 it is 99.98 percent. For the 50–69 group it is 99.5 percent. And even for the 70+ group it is 94.6 percent.

This brings me back to the beginning of the answer. Who, which owners or owners’ associations, in a private law society would see a reason to fundamentally change their normal and usual behavior in view of this dangerous situation? Who would close their business because of this? Who would stop working and producing or traveling? Who would impose on themselves a total ban on contact or a complete block on access regarding their property? I think the answer to these questions is obvious. On the basis of real, actual experience, rather than on the basis of an artificial test and test result that is only slightly and very vaguely correlated with a real experience of illness, we would certainly have taken one or two additional precautions, as we have done in the past in the face of, say, a serious flu epidemic. Certainly, we would have been more careful especially in dealing with older persons, who were and are exposed to a recognizably greater risk of disease. Probably a hospital manager or two would have increased the number of available beds. And perhaps the observation of changed or new disease symptoms would have led one or two virologists to search for a virus that somehow correlates with these specific symptoms. Perhaps it would even have led to the development of a test. And perhaps even to the search for a corresponding vaccine, even if this must be regarded as rather improbable in view of the high development costs and a predictably low demand for vaccination in comparison with an overall low risk assessment.

Politicians have discovered that health statistics offer an even greater gateway for governmental despotism and status craving than all the indicators of economic statistics.

The fact that the present course of events was and is in fact completely different has no objective reason, but is due solely to the existence of a class of persons, the political class or the political elite, who do not have to assume any responsibility or liability for the costs and consequences of their own actions and who can therefore increase their do-gooding to the point of megalomania.

Since time immemorial, the megalomania of politicians, born of irresponsibility, has manifested itself in the fact that, based on various key figures supplied by their respective official statistical authorities, these politicians have concocted a “scientifically based” justification for their ever more numerous and far-reaching state interventions into normal societal interactions. Up to now, however, these indicators have essentially been figures taken from the field of economic statistics, such as figures on income and wealth and their respective distribution, on economic growth, imports, exports, money supply, trade and payment balances, inflation, prices, wages, production, employment levels, etc., etc. Each and every one of these figures offered policymakers a possible reason to intervene. Either the figure was too high or too low, or it had to be stabilized by appropriate measures. Always, however, there was supposedly something to correct. There is no need here to further explain the extent of the redistributive effects and welfare losses that have resulted from this economic interventionism.

With the corona crisis, however, politics has moved on to completely new shores in this respect. Politicians have discovered that health statistics offer an even greater gateway for governmental despotism and status craving than all the indicators of economic statistics. On the basis of a virus test, which has been chosen as the official indicator of an allegedly acute or even fatal danger of infection, politics has succeeded in bringing almost our entire social life to a standstill, plunging millions of people into economic or social hardship or distress, while helping the pharmaceutical-industrial complex, i.e., for example, the manufacturers of masks, tests, and vaccines, to amass enormous wealth, and yet to emerge from the whole story, so far at least, as heroes.

A frightening, downright devastating realization.

This transcript of an interview of Hans Hermann-Hoppe by Thomas Jacob first appeared on Mises Wire on January 4, 2021 under the title “Hoppe on the Lockdowns!” It was translated from the German original by Robert Groezinger.

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About the Author: Hans-Hermann Hoppe

Hans-Hermann Hoppe, an Austrian School economist and libertarian/anarcho-capitalist philosopher, is Professor Emeritus of Economics at UNLV, Distinguished Senior Fellow with the Mises Institute, founder and president of The Property and Freedom Society, former editor of the Journal of Libertarian Studies, and a lifetime member of the Royal Horticultural Society. He is married to economist Dr. A. Gulcin Imre Hoppe, and resides with his wife in Istanbul.